Most repossessions involve sub-prime lenders
June 10, 2008
A recent report has shown that the majority of repossession cases in the UK involve sub-prime lenders. The research was carried out by the BBC in the light of the rocketing level of repossessions taking place in the UK. Sub-prime lenders are those that cater for consumers with bad credit, the self employed, and those that cannot prove their income. However, the interest rates that they charge can be extortionate, and many of those consumers that start to struggle to keep up with repayments come from the sub-prime mortgage sector.
The BBC looked at over seven thousand repossession court hearings as part of the research, which was research carried out for the recently aired Panorama programme. The results of the research showed that around 70% of repossession cases in the UK involve sub-prime lenders, reflecting the problems with affordability for those with bad credit and the self employed. In total sub-prime mortgages make up about 8% of all mortgages in the UK. In the United States this figure is far higher, with sub-prime mortgages taking around 20% of the market.
The investigation also looked at the number of sub-prime customers that were being advised to exaggerate their income in order to take out a mortgage, which they could not actually afford on their real income. This was quickly leading to missed repayments and eventually repossession as the consumers struggled to keep up with repayments. The BBC also looked at how many brokers and lenders were mis-selling mortgages in the sub-prime sector, knowing that they would get passed on to another company if there were any major problems.
The UK has seen repossession levels rocket over recent months, and this is a situation that is set to get worse when thousands of homeowners come off low fixed rate deals over the coming months.
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